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China’s new small business loans echo schemes in Europe and Japan, economists say
- Targeted Medium-Term Lending Facility announced on Wednesday mirrors moves by the European Central Bank and Bank of Japan
- Tool introduced by the The People’s Bank of China offers low-cost loans to banks to help fund small businesses aimed at shoring up the slowing economy
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China’s central bank reached into the toolkit of its peers around the world, announcing a new facility to encourage bank lending to companies that looks very similar to what others have done.
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The People’s Bank of China (PBOC) is trying to balance competing demands of a debt crackdown and ensuring that banks lend to support growth.
The clampdown has made it harder for small and private companies to borrow, and the new Targeted Medium-Term Lending Facility tool announced on Wednesday adds to measures announced recently which try to make it easier to raise money.
It’s “TLTROs with Chinese characteristics,” wrote Krishna Guha, the head of central bank strategy at Evercore ISI, referring to the European Central Bank’s Targeted Longer-Term Refinancing Operations.
According to Gene Ma, chief China economist at the Institute of International Finance in Washington, the PBOC’s main focus is not the stance of monetary policy but on impairments in the transmission mechanism.
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